NEW DELHI: The UPA government appeared to stave off a fresh crisis on Thursday after the national auditor played down suggestions of a Rs 10.7-lakh crore revenue loss to the exchequer due to faulty allocation of coal mining blocks.

A leaked draft report of the Comptroller and Auditor General (CAG) alleged that by not auctioning mines allotted to private and state-run firms, the government may have engendered revenue losses of truly epic proportions dwarfing all previous scams.

But the Prime Minister’s Office sprang into action and released a letter from the auditor saying the information was half-baked and misleading. The contents of the draft, which covered allocation of coal blocks between 2004 and 2009, were reported by the Times of India in its Thursday edition.

The story ignited an uproar in Parliament and hurt market sentiment while power companies such as NTPC, which hold coal blocks, denied making undue profits saying the tariff regime ensured that the entire benefit of lower cost of coal was passed on to consumers. But many power companies that are starved of fuel were excited by the prospect of coal blocks being auctioned.

The draft report, according to TOI, named a number of 'beneficiaries' in the public and private sectors. The biggest of these include NTPC, a joint venture between the Tata Group and Sasol, Jindal Steel and Power and a number of electricity boards. The supposed 'benefit' is based upon the premise that an auction should have taken place and on calculations estimating profit from the allocated mines. Asked to comment on the media report suggesting huge revenue loss, Prime Minister Manmohan Singh told reporters at a Rashtrapati Bhavan function: “The CAG has clarified there is no report. When there is no report, what is there to clarify.”

The Manmohan Singh-led administration, whose second stint in office has been dogged by a deluge of corruption allegations, this time moved swiftly to limit the damage in contrast to its flat-footed response when an earlier leaked CAG report had alleged a huge scam in the allocation of frequency spectrum to telecom companies.

The PMO issued a statement quoting the CAG, which dismissed the report about the scam as premature and misleading. In the letter, CAG Vinod Rai expressed anguish over leakage of raw reports and sought the prime minister’s help to investigate the leaks.

“Pursuant to clarification provided by the ministry in exit conferences held on February 9 and March 9, we have changed our thinking on the expression as in many cases the profits have not even begun to accrue. In fact, it is not even our case that the unintended benefit to the allocatee is an equivalent loss to the exchequer.

The leak of the initial draft causes great embarrassment as the audit report is still under preparation. Such leakage causes very deep anguish,” the PMO statement quoted the CAG as saying.

The swift footwork appeared to have worked, with talking heads on news channels moving on to other matters such as India’s vote against Sri Lanka at the UN. Earlier in the day, Coal Minister Sriprakash Jaiswal rubbished the report. “There is nobody at fault. There is no scam. It is a totally false news. If coal is made more costly, it will hurt the common man, who will have to pay more for electricity, cement and steel,” Jaiswal told reporters and urged journalists not to sensationalise the matter.

OPPOSITION DEMANDS CBI PROBE

Opposition parties demanded a CBI probe and were on the verge of stalling proceedings for the rest of the day. But Speaker Meira Kumar called a meeting of leaders of all political parties where Finance Minister Pranab Mukherjee laid out the schedule of financial business, including the railway and Union budgets, that need to be completed before March 30. He suggested the Opposition could raise any issue after the budget was passed.

Leader of Opposition Sushma Swaraj and leaders of other political parties agreed. Outside the House, the BJP demanded a probe into the allotment of coal blocks monitored by a court. “The CWG scam is (to the tune) of Rs 70,000 crore, 2G scam is Rs 1.76 lakh crore. But, now the new coal scam is Rs 10.67 lakh crore. It is a government of scams... from airwaves to mining, everywhere the government is involved in scams,” party spokesperson Prakash Javadekar told reporters.

He said in 2006, the government introduced the bill for auction of coal blocks but the government did not pass the bill till 2010. “Seventeen billion tonnes of coal reserves in 73 blocks were distributed to private companies. It is a huge scam. There are many cases where people have sold the licences,” he said.

DEMAND FOR AUCTION

The Confederation of Indian Industry seized the opportunity to demand auction of blocks. The move would help power producers that are desperately seeking fuel to fire their plants as local supply is scarce and imports too costly. CII said since 1993, only 28 of the 213 captive coal blocks that were allocated had commenced production, and in the past three years, none of the 42 blocks allocated by the government had started production.

“For viable and sustainable development of power sector, it is imperative that supply of coal increases at a rate which is at least equivalent to the growth in coal-based capacity addition. One way to achieve this is by auctioning of coal blocks through competitive bidding,” CII Director-General Chandrajit Banerjee said.

NTPC, which has been allocated some mines, said Coal India, the monopoly producer of coal, was unable to meet its requirement. “There is no way by which NTPC can make windfall profit out of the coal produced from these mines as under the Central Electricity Regulatory Commission (CERC) regulated regime, the cost of coal from these mines will be pass-through in the power tariff and, therefore, it will only help to reduce the ultimate cost of power at the end-user. We have not seen the details of the CAG report, therefore, we are not able to give any firm comment on this matter,” NTPC Chairman Arup Roy Choudhary said.

Pramod Deo, chairman and chief executive of CERC, said auctioning mines would increase the price to the final consumer. “Unless the coal sector is regulated (a regulator is appointed), we will have to give them the cost of production that they quote in the tariff proposals. However, if blocks go for auction, the cost of electricity will go up,” he said.

“Nevertheless, some distinction has to be made between private and public sector generators because private companies have full freedom in selling the power at whatever tariff it wants but it is not so for most public sector generators,” Deo said.

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